The overall impression is that the UK government is broadly happy with the current regime and is certainly not evincing any wish to tear up the rule book or effect radical changes to the regime inherited from the EU Securitisation Regulation. This report is about tweaking not transforming.
A number of technical issues are broached, some small – but not insignificant – changes are mooted but the report is light on concrete proposals or time frames. On many of the issues where the report does suggest change may be welcome, the report states more work will need to be done before specifics can be considered.
This is the case, for example, on disclosure requirements for private transactions. Changes to the current set-up would be good, but what changes will have to wait for careful consideration.
The report also indicates some ambivalence on the idea of an equivalence regime: in principle favourable but acknowledging it to be tricky in practice. There is a commitment to set one up…sometime later.
On some topics, HMT tentatively indicates a willingness to consider doing something but with no promises. This is the case on modifying some details of the retention rules, with which it is otherwise generally happy.
Equally, on the proposals for a green securitisation framework and sustainability disclosure, the response can be summarized as “not now, maybe soon, it depends, can we get back to you on that…”.
PCS noted that the report indicated broad satisfaction with the current third-party verification system and acknowledged the added value it provided.
In some parts, the report was more categorical. To no one’s surprise, the report indicated that the current use of special purpose vehicles needed no reform, and especially not along the lines of the creation of special limited purpose banks.
Also, and more unfortunately, on the inclusion of synthetics securitisation in the STS framework, without closing the door entirely, the report made it clear that neither HMT nor the UK regulatory community had any interest in such a development. This looks like a very high mountain to climb if stakeholders wish to see the changes already introduced in the EU apply to British banks. On the capital treatment of securitisations for bank and insurance investors, the tone is also very downbeat.
In conclusion, the report indicates that the British government is willing to tweak regulation onshored from the EU but no more. Whether that is reflective of a broad political decision at the highest levels on the future of the City of London or merely treading water until such a decision is made or even just the reflection of the fact that, as far as HMT is concerned, this particular piece of the financial regulatory machinery does not need to be amended in depth is impossible to tell at this stage.